Ah, April! It’s that special time of year when freelancers come together to bemoan our lame expense tracking efforts, wonder if our accountants are worth their fees and kvetch about freelance financial rot.

SciLancers’ approaches to and philosophies about recording our business’ yearly financial coming and goings are as diverse as our writing styles.

Helen Fields (bio) has “done the math” and decided that “having a day or two of misery every April is better than trying to keep up with a system all year long.” At the other end of the spectrum, Monya Baker (bio) tracks her expenses daily in a spreadsheet.

It doesn’t matter what system you use, as long as you have a system—but even having a system doesn’t always guarantee that you’ll use it.

“If I simply updated my expenses and income records monthly, or quarterly, I’m sure my total time would be less,” writes Adam Aston (bio). “Doing so once a year leads to frustrating forensic accounting efforts—what in the world was that $137 debit on my checking account in March last year?”

While the system you chose is largely personal, the scale of your business is going to dictate how diligently you stay on top of expenses. If your business expenses rarely top a couple thousand dollars, then there’s probably nothing wrong with the tried and true shoebox method (throw it all in the box and deal with it in April). But if your business is more complex and expenses are measured in the tens of thousands of dollars, you need to up the discipline and organization or risk missing potential deductions or, even worse, not having the paper work you need if you, shudder, ever get audited.

Separate business from pleasure

For many SciLancers, the most onerous part of taxes comes down to dealing with receipts and tracking expenses. We’ve found a few tricks to reduce the pain.

Keeping your business and personal finances separate is one of the best ways to avoid confusion at tax time (and uncomfortable questions from the IRS should you ever get audited). Fortunately, it’s easy to do by opening a business banking account and applying for a business credit card. It goes without saying that these should be used for business expenses only, otherwise they just add to the incestuous financial chaos come April.

“A business credit card is the easiest way by far to be lazy about this stuff and not get into too much trouble at the end of the year,” says Jessica Marshall (bio). Charge as many of your legitimate business expenses to it as you can and the credit card company will do a lot of the heavy lifting by cataloguing them in a monthly statement.

At the end of the year, I double check my monthly statements against my expense spreadsheet (updated quasi quarterly) to make sure no expenses slipped through the cracks. Also, since my business credit card is a cash-back business card, I get points on business-related purchases (office supplies, travel, etc.), which get traded in for cash on each statement. The savings aren’t huge, but the one to three percent add up.

Business bank account statements can offer the same kind of double-check, ensuring that you tracked income and expenses.

Tame receipts

But even with the credit card and bank account statements, you still need to deal with receipts and track expenses in a leger or spreadsheet. (Emily Gertz (bio) and I cover this in more detail in our chapter, Minding the Business in The Science Writers’ Handbook.) In addition to the shoebox, SciLancers have found some more modern ways to tame the pile of fading slips and pocket lint.

Jessica uses her phone to track expenses using Expensify (see Bryn Nelson’s review of the app). “It’s especially helpful on a trip, when you can take photos of your latte/taxi/beer-with-editor receipts, or type them right in when you make the purchase, and keep a tally of expenses,” she writes.

Adam likes Neat Receipts, “a simple scanner and OCR rig that whizzes through receipts. It gets those fading, BPA-impregnated receipts off my desk. Then at year-end, if need be, you can search them by total ($60.79) or date or vendor and re-cover what was spent on what.”

To accountant or not

Wrangling the receipts and credit card and banking statements is only half the battle. About 40% of SciLancers use some kind of software (TurboTax and its kin) to do their own taxes.

The rest of us stare down the detailed questionnaire our accountant sends us every year. There’s a lot of assigning to appropriate IRS categories (office, postage, travel, etc.) and adding up that has to be done before completing all those fill-in-the-blanks. This is where the kvetching comes in: if we’re already doing all that organizing and math, we’re halfway there, right? Why not just fill out a tax return while we’re at it and save some money? After all, for all that we’re paying our accountants shouldn’t they just take the shoebox and decode it? Um, no.

We’re not paying them to organize our finances (we could get a bookkeeper for that), we’re paying for their intimate knowledge of the tax code and for handholding in case of an audit.

“The value seems to be that he knows nuanced things such as what is the un-written but acceptable limit for office square footage deductions in NYC,” writes Adam. “He’s also really good at helping me maximize retirement contributions to minimize tax exposure. All of this might be learnable and doable on my own, but it’s well worth the fee for him to do it quickly, confidently, and with some assurance he’ll lend a hand should I ever be audited.”

Every year, I sit down with my accountant and ask him what more we can do to minimize taxes. I rely on him to be aggressive on my home office and other deductions. My return comes back with sheets for depreciation calculations and rental something-or-others and other esoterica of the tax code known only to accounting wizards. I doubt that I’d have the confidence to push those limits on my own.

My accountant isn’t cheap but I hope that the time savings, the tax savings and the peace of mind are all worth the fee and amount of up-front work I have to do to answer all those questions in his questionnaire.

In the end, it doesn’t really matter what tools and techniques you use to manage your business financials and do your taxes, as long as you get them done. Each April, we SciLancers vow to do things differently next year. Some years we succeed, some years we don’t. It’s human nature and comes with the freelancing territory.

Anne Sasso is an accomplished freelance writer, equally at home on the pages of the nation’s leading outdoor and science magazines as in the boardrooms of her corporate clients. Her work has appeared in Outside, Discover, Men’s Journal and Backpacker among others and online at Smithsonian.com and AAAS’ ScienceCareers.org. She now writes almost exclusively for corporate clients.
Anne worked in the heli-ski industry in western Canada, did a short stint as a commercial photographer’s assistant in Singapore and scrutinized rocks as an exploration geologist (she has a Ph.D. in geology) from the Arctic to the Andes before trading in her rock hammer for a pen in 2001. In 2007, she was a fellow in the Literary Journalism program at The Banff Center in Alberta. She now lives on the western slopes of the Green Mountains in Vermont. Anne is the Business Manager for The Science Writers' Handbook.

Thanks, Cameron! I can’t even imagine what my accountant would charge to go through all my receipts. And how could he possibly make sense of them? I don’t even send him my spreadsheets. I send in highly organized/edited versions of my spreadsheet!